Large-cap cement maker ACC Ltd’s weak March quarter results (Q1CY22) set the tone for the industry’s performance. acc Comes after the January to December accounting year.
The March quarter is usually a strong one for the industry, but this time, expectations were not very high, especially on operating performance, given the heavy input cost inflation.
But thanks to ACC’s cost-saving strategies, the increase in operating costs was not as bad as had been feared.
Analysts said, “We had a ~150/mt quarter-on-quarter (QoQ) increase in operating costs driven by higher power and fuel costs. However, operating costs came down on a QoQ basis, which was a pleasant surprise. ” In a report dated April 20, Nirmal Bang Institutional Equities.
Sharing a similar view, analysts at JM Financial Institutional Securities Ltd said the company has a strategy to pay off low inventory along with the benefits of its Project Mount. The brokerage house said reduction in direct expenses aided ACC’s compounded Ebitda/tonne, which rose sequentially in Q1CY22.
Responding to its earnings, shares of the company rose 4.16% on the National Stock Exchange in early deals on Wednesday.
However, analysts have cautioned about the less impact of higher power and fuel costs from the first half of FY13.
While there was some respite from operating costs, business growth was disappointing. Cement sales volume fell 3% year-on-year to 7.71 million tonnes in Q1CY22. Analysts noted that at the start of the quarter, volumes were impacted by weak demand, though it did not benefit from the demand pick-up in March, given the delayed capacity addition.
“ACC’s high capacity utilization rate (+90%) has resulted in stagnant volume and market/capacity share loss due to slower capacity growth as compared to the industry,” said analysts at Yes Securities Ltd.
Also, investors should note that ACC’s integrated unit at Ametha, Madhya Pradesh will now be operationalized by 4QCY22 instead of the 2QCY22 mentioned earlier. “The Ametha expansion has already been significantly delayed and we were now building on additional quantities from these capacities in our CY22 estimates, which we have now extended to CY23,” Nirmal Bang reports.
Meanwhile, realizations in the March quarter were slightly ahead of expectations due to some price hikes in its key markets during the quarter. However, these costs will not be enough to absorb inflation, so further increases in prices are important for the stock.